India to Launch ARC Token Stablecoin Backed by Government Securities

India has partnered with Polygon and Anq to launch its first sovereign-backed digital token, fully backed by Indian Government Securities (G-Secs). The aim of this new INR-linked Asset Reserve Certificate (ARC) token is to modernize the country's digital financial ecosystem while retaining liquidity and innovation within the domestic market.

In a bold move, Polygon joined forces with fintech firm Anq to create a government-supported digital instrument. Unlike privately operated stablecoins linked to the U.S. dollar, this token is directly tied to Indian sovereign assets. Sandeep Nailwal, co-founder of Polygon, expressed confidence in September that India would introduce an INR-backed stablecoin within three months, raising expectations across crypto and fintech industries.

The ARC token is an Asset Reserve Certificate designed for stability and transparency. Each ARC token corresponds to an equal value in Indian Government Securities or Treasury Bills held in reserve. This ensures that the digital currency is fully backed by sovereign assets, making it a non-speculative, regulated token closely tied to the value of the Indian Rupee (INR). Unlike dollar-based stablecoins like USDT and USDC, which drain Indian liquidity overseas, the ARC token keeps liquidity within the Indian financial ecosystem, boosting domestic economic growth.

Polygon and Anq have designed ARC to complement the monetary policies of the Reserve Bank of India (RBI). Under a dual-rupee system, the RBI’s Digital Rupee is the official settlement layer, while ARC serves as a programmable financial layer operated by regulated private entities. This framework encourages innovation in the private sector, while ensuring the RBI retains complete control over monetary policy. Additionally, ARC tokens are issued only when government securities are purchased, thus indirectly contributing to government funding without the need for additional taxes.

Despite its potential, the project faces criticism from some in the crypto community. Crypto analyst Josh argues that branding the token as “sovereign-backed” is merely a marketing tactic. He claims the token is centralized and censorable, likening it to a digital rupee rather than a true stablecoin. Josh believes the centralization undermines crypto’s core values of decentralization and permissionless access.

Despite the skepticism, India is determined to explore a future where digital money is backed by real sovereign assets rather than private reserves. The creation of the ARC token signifies a step towards redefining the country’s financial infrastructure and aligning it with the rapidly advancing global fintech ecosystem.